Since late April, Nvidia has been on a jaw-dropping tear — soaring nearly triple digits and leaving even seasoned investors stunned. With the stock chart looking like a rocket launch, one question is echoing louder by the day: Is Nvidia overvalued?
Those already holding NVDA 📈 are debating whether to ride the wave or lock in profits.
Meanwhile, those who’ve been watching from the sidelines are wondering: Have I missed the boat — or is there still time to climb aboard?
Let’s break down what’s driving the hype, what the numbers say, and whether the momentum has real staying power.to get in.
Is Nvidia Overvalued? A Look at the Fundamentals
In this post, we break down how to analyze NVDA using robust fundamental analysis – and the best part? The numbers tell a surprisingly clear story.
Valuation ratios well below historical highs
Despite Nvidia hitting new all-time highs again and again, the stock still doesn’t look overpriced when measured against its own historical benchmarks.
NVDA’s Price/Sales ratio, one of the most basic valuation ratios in fundamental analysis, is currently at a level of 30x. This is a far cry from the 45x reached in mid 2023. The Price / Sales ratio reflects how much you have to pay per $ of sales to own the stock.
Certainly, NVDA’s Price/Sales ratio was significantly lower in recent years. To put things into perspective, let’s factor in growth and profitability .
Does growth support valuation?
At the time of this writing, Nvidia’s forward P/E ratio stands at 40x. Just by looking at this number, inexperienced investors may jump to the conclusion that Nvidia’s stock is egregiously expensive.
In fundamental analysis, however, a stock’s valuation must be put into the context of growth and profitability.
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Revenue growth is both massive and consistent
The quantum leap in generative AI combined with strong product leadership keeps on driving Nvidia’s revenue growth quarter after quarter.
As the following chart shows, even though revenue growth has come down from > 100%/quarter growth, it still grew at mind-boggling rate of 69% in the most recent quarter.
With unabated demand for AI chips and data centers, one could even qualify Nvidia’s revenue growth as sustainable and mature.
Ranking first among large-cap tech in profit growth
Nvidia’s leadership position in the market for AI chips and graphics processing units (GPUs) is projected to grow the company’s net income from around $30 billion in FY2025 to approximately $45–50 billion by FY2027, reflecting a compound annual growth rate (CAGR) of about 20–25%.
With earnings projected to grow by 90% in FY2025, followed by 30–35% in FY2026, NVDA has the strongest growth profiles in large-cap tech.
Profitability keeps on growing
Nvidia’s EBITDA margin continues to rise due to the explosive growth in its high-priced data center and AI accelerator segments, which now contribute the majority of revenue. At the same time, its fabless model keeps capital costs low, allowing revenue gains to translate more efficiently into operating profit.
This has enabled the company to grow its EBITDA margin to a level in excess of 60% in its most recent financial year, up from 20% in 2023.
Mind-boggling profitability
Nvidia’s return on assets (ROA) has surged dramatically, rising from just over 10% in 2023 to a projected 115% by 2027, reflecting one of the most capital-efficient growth stories in tech history. This leap is largely driven by Nvidia’s ability to generate massive profits with relatively modest capital expenditures
As the company scales without the heavy asset base typical of traditional chipmakers, its profitability metrics are breaking norms — and setting new benchmarks for efficiency in the semiconductor industry.
An ROA in excess of 100% – whereby net profit exceeds a company’s total assets – is virtually unheard of. By way of comparison, Nvidia’s competitor Applied Material (AMAT 📈) reports return on assets of 22%. Meta and Google’s ROA reach 27%.
Putting it all into context
At the time of this writing, Nvidia’s forward P/E ratio stands at 40x. Looking at this number, inexperienced investors may jump to the conclusion that Nvidia’s stock is egregiously expensive.
In reality, the market prices in future earnings. Based on projected net profit in 2027, Nvidia’s price to earnings ratio drops to 28.5x. A P/E ratio of 28.5x looks anything but unreasonable for a company growing at the rate Nvidia does.
Add to that the fact that the market systematically underestimates Nvidia’s growth potential. Over the past 10 fiscal quarters, Nvidia has beat analyst earnings forecasts in 9 of them. That exceptional streak reflects the company’s consistent ability to outperform expectations. If this trend continues, Nvidia’s 2027 forward P/E ratio of 28.5x should in fact be lower as earnings may come in higher than forecast.
Putting valuation into perspective with growth
One of the best ways to judge whether a stock’s price is justified by its earnings momentum is the PEG ratio — short for Price/Earnings to Growth. It’s calculated by dividing the P/E ratio by the company’s earnings growth rate, offering a quick snapshot of value relative to performance. A lower PEG suggests the stock may be undervalued given how fast it’s growing, while a higher one could raise red flags. So when it comes to Nvidia, the PEG ratio helps cut through the noise: is this growth story already priced in — or is there still room to run?
A PEG ratio of around 1 is generally interpreted in a way that the stock is valued fairly in relation to its expected earnings growth.
At 0.8x Nvidia’s PEG ratio based on 2027 earnings is well below 1x.
The verdict – Is Nvidia overvalued?
Our fundamental analysis indicates that NVDA is not overvalued. A forward P/E ratio of 28.5x for 2027 is very much justifiable for a high growth company of Nvidia’s caliber.
A PEG ratio of just 0.8 even suggests that NVDA is inexpensive based on forward earnings.
Analysts concur with this assessment. Their average price target for Nvidia stock is currently $190, suggesting 9% upside. Chances are that analysts will revise the target upwards rather down.
Where will Nvidia’s stock price go from here?
If the company delivers on earnings expectations, or even beats them as it so regularly does, there’s no stopping Nvidia’s stock from going to $200 by yearend – barring external events.
Still, Nvidia investors must keep a watchful eye on a few things.
Does big tech maintain the massive level of investment in AI?
Can the company maintain its pricing power?
Can it continue to drive its economies of scale?
What could go wrong?
Some skeptics may rightly note that the chip industry has always been prone to wild swings — so what makes this time any different?
We’d argue: plenty. Unlike past booms, today’s demand—driven by AI, data centers, and accelerated computing—is structural, not speculative. This isn’t another short-lived crypto rush; it’s a long-term transformation of how the world computes.
Nvidia isn’t riding a single wave anymore. Its revenue is now spread across a powerful mix of AI, data centers, autonomous vehicles, gaming, and even crypto — making its growth story far more resilient than in cycles past.
FAQ
1. What is Nvidia’s current valuation compared to its historical average?
As of mid-2025, Nvidia trades at a forward P/E ratio that sits above the historical average, reflecting investor confidence in long-term AI-driven growth. However, when adjusted for its earnings growth rate using the PEG ratio, Nvidia appears more reasonably valued, suggesting the premium may be justified by fundamentals.
2. Why do some analysts believe Nvidia is overvalued?
Some analysts view Nvidia as overvalued due to its rapid share price appreciation, now reflecting high expectations for continued AI demand and margin expansion. Concerns also stem from the cyclical nature of the semiconductor industry and the possibility that AI-related growth could normalize over time.
3. Is Nvidia still a good buy despite its high valuation?
As stated in this post, at the time of this writing, Nvidia looks like a good buy if its earnings continue to grow at projected rates and AI adoption expands as expected. Investors should consider valuation metrics like the PEG ratio, return on assets, and EBITDA margins to assess whether the stock’s price accurately reflects its strong fundamentals.
Important notice:
This article is not to be understood as a recommendation to buy or sell. Please conduct your own research before making investment decisions. To this end, we aim to provide you with the best portfolio management tool and investment research data possible. However, we cannot guarantee the accuracy of this information in spite of our extensive efforts to ensure that the data is complete and 100% accurate.